While I stand by my view that the doctrine of obviousness-type double patenting is one of the most complicated aspects of U.S. patent law, regulations governing the ability to claim “Small Entity” status and pay reduced USPTO fees come a close second. In a final rule effective January 20, 2021, the USPTO revised its Small Entity rules to remove disincentives of collaborating with the Federal government by, for example, making the impact of Federal agency rights to inventions made under “Cooperative Research and Development Agreements” (CRADAs) similar to the impact of Federal agency rights to inventions made under Federal funding agreements.

Small Entity Status and Federal Agency Rights

One tricky part of the USPTO Small Entity regulations (37 CFR § 1.27) is that an entity who otherwise qualifies to claim “Small Entity” status loses the right to do so if the invention is assigned or licensed (or under an obligation to be assigned or licensed) to an entity that does not qualify to pay reduced fees. While non-profit organizations including universities and non-profit research institutions typically qualify as Small Entities, government agencies do not. This raises issues for inventions made under agreements that give Federal agencies certain rights in the invention.

The existing Small Entity rules already include “exceptions” that protect the Small Entity status of inventions made under Federally-funded research agreements, e.g., under the Bayh-Dole Act, in 37 CFR § 1.27(a)(4)(ii):

37 CFR § 1.27(a)(4) License to a Federal agency.

(i) For persons under paragraph (a)(1) of this section, a license to the Government resulting from a rights determination under Executive Order 10096 does not constitute a license so as to prohibit claiming small entity status.

(ii) For small business concerns and nonprofit organizations under paragraphs (a)(2) and (a)(3) of this section, a license to a Federal agency resulting from a funding agreement with that agency pursuant to 35 U.S.C. 202(c)(4) does not constitute a license for the purposes of paragraphs (a)(2)(i) and (a)(3)(i) of this section.

(Exception (i) relates to government use licenses a Federal employee/inventor is obligated to grant if he/she is allowed to retain title to the invention under Executive Order 10096.)

The Revised Small Entity Status Rules

As explained in the December 21, 2020 Federal Register Notice, the revised Small Entity rules expand the exceptions to encompass additional, parallel situations. For example, the revised rules treat inventions made under CRADAs similarly to inventions made under Federal funding agreements, and also permit small business concerns to claim Small Entity status for Federally-funded inventions when there is a Federal employee co-inventor. The Federal Register Notice explains other scenarios encompassed by the revised rules in more detail.

Rule 27(a)(4) is rewritten as follows:

(4) Federal Government Use License Exceptions.

In a patent application filed, prosecuted, and if patented, maintained at no expense to the Government, with the exception of any expense taken to deliver the application and fees to the Office on behalf of the applicant:

(i) For persons under paragraph (a)(1) of this section, claiming small entity status is not prohibited by:

(A) A use license to the Government resulting from a rights determination under Executive Order 10096 made in accordance with § 501.6 of this title;

(B) A use license to the Government resulting from Federal agency action pursuant to 15 U.S.C. 3710d(a) allowing the Federal employee-inventor to obtain or retain title to the invention; or

(C) A use license to a Federal agency resulting from retention of rights under 35 U.S.C. 202(d) by an inventor employed by a small business concern or nonprofit organization contractor, provided the license is equivalent to the license under 35 U.S.C. 202(c)(4) the Federal agency would have received had the contractor elected to retain title, and all the conditions applicable under § 401.9 of this title to an employee/ inventor are met.

(ii) For small business concerns and nonprofit organizations under paragraphs (a)(2) and (3) of this section, a use license to a Federal agency resulting from a funding agreement with that agency pursuant to 35 U.S.C. 202(c)(4) does not preclude claiming small entity status, provided that:

(A) The subject invention was made solely by employees of the small business concern or nonprofit organization; or

(B) In the case of a Federal employee co-inventor, the Federal agency employing such co-inventor took action pursuant to 35 U.S.C. 202(e)(1) to exclusively license or assign whatever rights currently held or that it may acquire in the subject invention to the small business concern or nonprofit organization, subject to the license under 35 U.S.C. 202(c)(4).

(iii) For small business concerns and nonprofit organizations under paragraphs (a)(2) and (3) of this section that have collaborated with a Federal agency laboratory pursuant to a cooperative research and development agreement (CRADA) under 15 U.S.C. 3710a(a)(1), claiming small entity status is not prohibited by a use license to the Government pursuant to:

(A) 15 U.S.C. 3710a(b)(2) that results from retaining title to an invention made solely by the employee of the small business concern or nonprofit organization; or

(B) 15 U.S.C. 3710a(b)(3)(D), provided the laboratory has waived in whole any right of ownership the Government may have to the subject invention made by the small business concern or nonprofit organization, or has exclusively licensed whatever ownership rights the Government may acquire in the subject invention to the small business concern or nonprofit organization.

(iv) Regardless of whether an exception under this paragraph (a)(4) applies, no refund under § 1.28(a) is available for any patent fee paid by the Government.